[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1937 Introduced in House (IH)]







108th CONGRESS
  1st Session
                                H. R. 1937

To amend the Internal Revenue Code of 1986 to provide tax incentives to 
     encourage small business health plans, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 1, 2003

  Mr. Moore introduced the following bill; which was referred to the 
   Committee on Ways and Means, and in addition to the Committees on 
Energy and Commerce and Small Business, for a period to be subsequently 
   determined by the Speaker, in each case for consideration of such 
 provisions as fall within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to provide tax incentives to 
     encourage small business health plans, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Business Health Insurance 
Affordability Act of 2003''.

SEC. 2. DEDUCTION FOR 100 PERCENT OF HEALTH INSURANCE COSTS OF SELF-
              EMPLOYED INDIVIDUALS.

    (a) In General.--Paragraph (1) of section 162(l) is amended to read 
as follows:
            ``(1) Allowance of deduction.--In the case of an individual 
        who is an employee within the meaning of section 401(c)(1), 
        there shall be allowed as a deduction under this section an 
        amount equal to 100 percent of the amount paid during the 
        taxable year for insurance which constitutes medical care for 
        the taxpayer and the taxpayer's spouse and dependents.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2003.

SEC. 3. CREDIT FOR HEALTH INSURANCE EXPENSES OF SMALL BUSINESSES.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business-related 
credits) is amended by adding at the end the following:

``SEC. 45G. SMALL BUSINESS HEALTH INSURANCE EXPENSES.

    ``(a) General Rule.--For purposes of section 38, in the case of a 
small employer, the health insurance credit determined under this 
section for the taxable year is an amount equal to the applicable 
percentage of the expenses paid by the taxpayer during the taxable year 
for health insurance coverage for such year for employees of such 
employer.
    ``(b) Applicable Percentage.--For purposes of subsection (a), the 
applicable percentage is--
            ``(1) in the case of insurance purchased as a member of a 
        qualified health benefit purchasing coalition (as defined in 
        section 9841), 40 percent, and
            ``(2) in the case of insurance not described in paragraph 
        (1), 30 percent.
    ``(c) Limitations.--
            ``(1) Per employee dollar limitation.--The amount of 
        expenses taken into account under subsection (a) with respect 
        to any employee for any taxable year shall not exceed--
                    ``(A) in the case of insurance purchased as a 
                member of a coalition referred to in subsection 
                (b)(1)--
                            ``(i) $800 in the case of self-only 
                        coverage, and
                            ``(ii) $2,000 in the case of family 
                        coverage, and
                    ``(B) in any other case--
                            ``(i) $600 in the case of self-only 
                        coverage, and
                            ``(ii) $1,500 in the case of family 
                        coverage.
        In the case of an employee who is covered for only a portion of 
        such taxable year, the limitation under the preceding sentence 
        shall be an amount which bears the same ratio to such 
        limitation (determined without regard to this sentence) as such 
        portion bears to the entire taxable year.
            ``(2) Period of coverage.--Expenses may be taken into 
        account under subsection (a) only with respect to coverage for 
        the 4-year period beginning on the later of--
                    ``(A) the date of the enactment of this section, or
                    ``(B) the earliest date that the employee is 
                covered under the plan.
            ``(3) Employer must bear 65 percent of cost and cover 70 
        percent of qualified employees.--Expenses may be taken into 
        account under subsection (a) only if--
                    ``(A) at least 65 percent of the cost of the 
                coverage (without regard to this section) is borne by 
                the employer, and
                    ``(B) the plan provides health insurance coverage 
                to at least 70 percent of the qualified employees of 
                such employer.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Health insurance coverage.--The term `health 
        insurance coverage' has the meaning given such term by section 
        9832(b)(1).
            ``(2) Qualified employee.--
                    ``(A) In general.--The term `qualified employee' 
                means any employee of an employer if the annual rate of 
                such employee's compensation (as defined in section 
                414(s)) does not exceed $40,000.
                    ``(B) Treatment of certain employees.--The term 
                `employee' shall include a leased employee within the 
                meaning of section 414(n).
                    ``(C) Reduction of credit for employees earning 
                more than $30,000.--If the annual rate of an employee's 
                compensation (as defined in section 414(s)) exceeds 
                $30,000, the limitation under subsection (c)(1) 
                (determined without regard to this clause) shall be 
                reduced (but not below zero) by an amount which bears 
                the same ratio to such limitation as such excess bears 
                to $10,000.
                    ``(D) Employees having family coverage.--In the 
                case of an employee who has family coverage--
                            ``(i) subparagraph (A) shall be applied by 
                        substituting `$50,000' for `$40,000', and
                            ``(ii) subparagraph (C) shall be applied by 
                        substituting `$40,000' for `$30,000'.
            ``(3) Small employer.--The term `small employer' has the 
        meaning given to such term by section 4980D(d)(2); except that 
        only qualified employees shall be taken into account.
    ``(e) Special Rules.--
            ``(1) Certain rules made applicable.--For purposes of this 
        section, rules similar to the rules of section 52 shall apply.
            ``(2) Amounts paid under salary reduction arrangements.--No 
        amount paid or incurred pursuant to a salary reduction 
        arrangement shall be taken into account under subsection (a).
            ``(3) Inflation adjustment.--In the case of any taxable 
        year beginning in a calendar year after 2004, each dollar 
        amount contained in subsections (c)(1) and (d)(2)(B) shall be 
        increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 2003' for `calendar year 1992' in 
                subparagraph (B) thereof.
        Any increase determined under the preceding sentence shall be 
        rounded to the nearest multiple of $50.
    ``(f) Termination.--This section shall not apply to expenses paid 
or incurred by an employer with respect to any arrangement established 
on or after January 1, 2010.''.
    (b) Credit To Be Part of General Business Credit.--Section 38(b) of 
such Code (relating to current year business credit) is amended by 
striking ``plus'' at the end of paragraph (13), by striking the period 
at the end of paragraph (14) and inserting ``, plus'', and by adding at 
the end the following:
            ``(15) in the case of a small employer (as defined in 
        section 45G(d)(3)), the health insurance credit determined 
        under section 45G(a).''
    (c) No Carrybacks.--Subsection (d) of section 39 of such Code 
(relating to carryback and carryforward of unused credits) is amended 
by adding at the end the following:
            ``(11) No carryback of section 45g credit before effective 
        date.--No portion of the unused business credit for any taxable 
        year which is attributable to the employee health insurance 
        expenses credit determined under section 45G may be carried 
        back to a taxable year beginning before January 1, 2004.''
    (d) Denial of Double Benefit.--Section 280C of such Code is amended 
by adding at the end the following new subsection:
    ``(d) Credit for Small Business Health Insurance Expenses.--
            ``(1) In general.--No deduction shall be allowed for that 
        portion of the expenses (otherwise allowable as a deduction) 
        taken into account in determining the credit under section 45G 
        for the taxable year which is equal to the amount of the credit 
        determined for such taxable year under section 45G(a).
            ``(2) Controlled groups.--Persons treated as a single 
        employer under subsection (a) or (b) of section 52 shall be 
        treated as 1 person for purposes of this section.''
    (e) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following:

                              ``Sec. 45G. Small business health 
                                        insurance expenses.''
    (f) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after 
December 31, 2003, for arrangements established after the date of the 
enactment of this Act.

SEC. 4. CERTAIN GRANTS BY PRIVATE FOUNDATIONS TO QUALIFIED HEALTH 
              BENEFIT PURCHASING 
              COALITIONS.

    (a) In General.--Section 4942 of the Internal Revenue Code of 1986 
(relating to taxes on failure to distribute income) is amended by 
adding at the end the following:
    ``(k) Certain Qualified Health Benefit Purchasing Coalition 
Distributions.--
            ``(1) In general.--For purposes of subsection (g), sections 
        170, 501, 507, 509, and 2522, and this chapter, a qualified 
        health benefit purchasing coalition distribution by a private 
        foundation shall be considered to be a distribution for a 
        charitable purpose.
            ``(2) Qualified health benefit purchasing coalition 
        distribution.--For purposes of paragraph (1)--
                    ``(A) In general.--The term `qualified health 
                benefit purchasing coalition distribution' means any 
                amount paid or incurred by a private foundation to or 
                on behalf of a qualified health benefit purchasing 
                coalition (as defined in section 9841) for purposes of 
                payment or reimbursement of amounts paid or incurred in 
                connection with the establishment and maintenance of 
                such coalition.
                    ``(B) Exclusions.--Such term shall not include any 
                amount used by a qualified health benefit purchasing 
                coalition (as so defined)--
                            ``(i) for the purchase of real property,
                            ``(ii) as payment to, or for the benefit 
                        of, members (or employees or affiliates of such 
                        members) of such coalition, or
                            ``(iii) for any expense paid or incurred 
                        more than 48 months after the date of 
                        establishment of such coalition.
            ``(3) Termination.--This subsection shall not apply--
                    ``(A) to qualified health benefit purchasing 
                coalition distributions paid or incurred after December 
                31, 2010, and
                    ``(B) with respect to start-up costs of a coalition 
                which are paid or incurred after December 31, 2012.''.
    (b) Qualified Health Benefit Purchasing Coalition.--
            (1) In general.--Chapter 100 of such Code (relating to 
        group health plan requirements) is amended by adding at the end 
        the following new subchapter:

     ``Subchapter D--Qualified Health Benefit Purchasing Coalition

                              ``Sec.  9841.  Qualified health benefit 
                                        purchasing coalition.

``SEC. 9841. QUALIFIED HEALTH BENEFIT PURCHASING 
              COALITION.

    ``(a) In General.--A qualified health benefit purchasing coalition 
is a private not-for-profit corporation which--
            ``(1) sells health insurance through State licensed health 
        insurance issuers in the State in which the employers to which 
        such coalition is providing insurance are located, and
            ``(2) establishes to the Secretary, under State 
        certification procedures or other procedures as the Secretary 
        may provide by regulation, that such coalition meets the 
        requirements of this section.
    ``(b) Board of Directors.--
            ``(1) In general.--Each purchasing coalition under this 
        section shall be governed by a Board of Directors.
            ``(2) Election.--The Secretary shall establish procedures 
        governing election of such Board.
            ``(3) Membership.--The Board of Directors shall--
                    ``(A) be composed of representatives of the members 
                of the coalition, in equal number, including small 
                employers and employee representatives of such 
                employers, but
                    ``(B) not include other interested parties, such as 
                health care service providers, health insurers, or 
                insurance agents or brokers which may have a conflict 
                of interest with the purposes of the coalition.
    ``(c) Membership of Coalition.--
            ``(1) In general.--A purchasing coalition shall accept all 
        small employers residing within the area served by the 
        coalition as members if such employers request such membership.
            ``(2) Other members.--The coalition, at the discretion of 
        its Board of Directors, may be open to individuals and large 
        employers.   
            ``(3) Voting.--Members of a purchasing coalition shall have 
        voting rights consistent with the rules established by the 
        State.
    ``(d) Duties of Purchasing Coalitions.--Each purchasing coalition 
shall--
            ``(1) enter into agreements with small employers (and, at 
        the discretion of its Board, with individuals and other 
        employers) to provide health insurance benefits to employees 
        and retirees of such employers,
            ``(2) where it is feasible and advisable, enter into 
        agreements with 3 or more unaffiliated, qualified licensed 
        health plans, to offer benefits to members,
            ``(3) offer to members at least 1 open enrollment period of 
        at least 30 days per calendar year,
            ``(4)(A) serve a geographical area which, under the State 
        certification procedures referred to in subsection (a)(2), is 
        significant, and
            ``(B) market to all eligible members in that area, and
            ``(5) carry out other functions provided for under this 
        section.
    ``(e) Limitation on Activities.--A purchasing coalition shall not--
            ``(1) perform any activity (including certification or 
        enforcement) relating to compliance or licensing of health 
        plans,
            ``(2) assume insurance or financial risk in relation to any 
        health plan, or
            ``(3) perform other activities identified by the State as 
        being inconsistent with the performance of its duties under 
        this section.
    ``(f) Additional Requirements for Purchasing Coalitions.--As 
provided by the Secretary in regulations, a purchasing coalition shall 
be subject to requirements similar to the requirements of a group 
health plan under this chapter.
    ``(g) Relation to Other Laws.--
            ``(1) Preemption of state fictitious group laws.--
        Requirements (commonly referred to as fictitious group laws) 
        relating to grouping and similar requirements for health 
        insurance coverage are preempted to the extent such 
        requirements impede the establishment and operation of 
        qualified health benefit purchasing coalitions.
            ``(2) Allowing savings to be passed through.--Any State law 
        that prohibits health insurance issuers from reducing premiums 
        on health insurance coverage sold through a qualified health 
        benefit purchasing coalition to reflect administrative savings 
        is preempted. This paragraph shall not be construed to preempt 
        State laws that impose restrictions on premiums based on health 
        status, claims history, industry, age, gender, or other 
        underwriting factors.
            ``(3) No waiver of hipaa requirements.--Nothing in this 
        section shall be construed to change the obligation of health 
        insurance issuers to comply with the requirements of title 
        XXVII of the Public Health Service Act with respect to health 
        insurance coverage offered to small employers in the small 
        group market through a qualified health benefit purchasing 
        coalition.
    ``(h) Definition of Small Employer.--For purposes of this section--
            ``(1) In general.--The term `small employer' means, with 
        respect to any calendar year, any employer if such employer 
        employed an average of at least 2 and not more than 50 
        qualified employees on business days during either of the 2 
        preceding calendar years. For purposes of the preceding 
        sentence, a preceding calendar year may be taken into account 
        only if the employer was in existence throughout such year.
            ``(2) Employers not in existence in preceding year.--In the 
        case of an employer which was not in existence throughout the 
        1st preceding calendar year, the determination under paragraph 
        (1) shall be based on the average number of qualified employees 
        that it is reasonably expected such employer will employ on 
        business days in the current calendar year.''.
            (2) Conforming amendment.--The table of subchapters for 
        chapter 100 of such Code is amended by adding at the end the 
        following item:

                              ``Subchapter D.  Qualified health benefit 
                                        purchasing coalition.''.
    (c) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 2002.

SEC. 5. STATE GRANT PROGRAM FOR MARKET INNOVATION.

    (a) In General.--The Secretary of Health and Human Services (in 
this section referred to as the ``Secretary'') shall establish a 
program (in this section referred to as the ``program'') to award 
demonstration grants under this section to States to allow States to 
demonstrate the effectiveness of innovative ways to increase access to 
health insurance through market reforms and other innovative means. 
Such innovative means may include (and are not limited to) any of the 
following:
            (1) Alternative group purchasing or pooling arrangements, 
        such as a purchasing cooperatives for small businesses, 
        reinsurance pools, or high risk pools.
            (2) Individual or small group market reforms.
            (3) Consumer education and outreach.
            (4) Subsidies to individuals, employers, or both, in 
        obtaining health insurance.
    (b) Scope; Duration.--The program shall be limited to not more than 
10 States and to a total period of 5 years, beginning on the date the 
first demonstration grant is made.
    (c) Conditions for Demonstration Grants.--
            (1) In general.--The Secretary may not provide for a 
        demonstration grant to a State under the program unless the 
        Secretary finds that under the proposed demonstration grant--
                    (A) the State will provide for demonstrated 
                increase of access for some portion of the existing 
                uninsured population through a market innovation (other 
                than merely through a financial expansion of a program 
                initiated before the date of the enactment of this 
                Act);
                    (B) the State will comply with applicable Federal 
                laws;
                    (C) the State will not discriminate among 
                participants on the basis of any health status-related 
                factor (as defined in section 2791(d)(9) of the Public 
                Health Service Act), except to the extent a State 
                wishes to focus on populations that otherwise would not 
                obtain health insurance because of such factors; and
                    (D) the State will provide for such evaluation, in 
                coordination with the evaluation required under 
                subsection (d), as the Secretary may specify.
            (2) Application.--The Secretary shall not provide a 
        demonstration grant under the program to a State unless--
                    (A) the State submits to the Secretary such an 
                application, in such a form and manner, as the 
                Secretary specifies;
                    (B) the application includes information regarding 
                how the demonstration grant will address issues such as 
                governance, targeted population, expected cost, and the 
                continuation after the completion of the demonstration 
                grant period; and
                    (C) the Secretary determines that the demonstration 
                grant will be used consistent with this section.
            (3) Focus.--A demonstration grant proposal under section 
        need not cover all uninsured individuals in a State or all 
        health care benefits with respect to such individuals.
    (d) Evaluation.--The Secretary shall enter into a contract with an 
appropriate entity outside the Department of Health and Human Services 
to conduct an overall evaluation of the program at the end of the 
program period. Such evaluation shall include an analysis of 
improvements in access, costs, quality of care, or choice of coverage, 
under different demonstration grants.
    (e) Option To Provide for Initial Planning Grants.--Notwithstanding 
the previous provisions of this section, under the program the 
Secretary may provide for a portion of the amounts appropriated under 
subsection (f) (not to exceed $5,000,000) to be made available to any 
State for initial planning grants to permit States to develop 
demonstration grant proposals under the previous provisions of this 
section.
    (f) Authorization of Appropriations.--There are authorized to be 
appropriated $100,000,000 for each fiscal year to carry out this 
section. Amounts appropriated under this subsection shall remain 
available until expended.
    (g) State Defined.--For purposes of this section, the term 
``State'' has the meaning given such term for purposes of title XIX of 
the Social Security Act.

SEC. 6. GRANT PROGRAM TO FACILITATE HEALTH BENEFITS INFORMATION FOR 
              SMALL EMPLOYERS.

    (a) In General.--The Small Business Administration shall award 
grants to 1 or more States, local governments, and non-profit 
organizations for the purposes of--
            (1) demonstrating new and effective ways to provide 
        information about the benefits of health insurance to small 
        employers, including tax benefits, increased productivity of 
        employees, and decreased turnover of employees,
            (2) making employers aware of their current rights in the 
        marketplace under State and Federal health insurance reforms, 
        and
            (3) making employers aware of the tax treatment of 
        insurance premiums.
    (b) Authorization.--There is authorized to be appropriated 
$10,000,000 for each of the first 5 fiscal years beginning after the 
date of the enactment of this Act for grants under subsection (a).
                                 <all>